IC Market Espresso 10 Jul 2023

Local Equity Emerges Victorious: The Hard-Fought Battle for Recognition

Today we present you with both regional & global equity performance, as already half of the year is up! This article aims to highlight the impressive performance of regional stock exchanges in the face of global competition. We will look at companies contributing to the outperformance of local equity indices.

In the first half of 2023, regional stock exchanges demonstrated their resilience and competence as they outperformed global benchmarks such as the S&P 500 and NASDAQ. While the magnitude of the gains may not have been astronomical, the consistent upward trajectory of local equity indices showcases the remarkable performance of regional markets. Overall, even with an economic landscape characterized by uncertainties, equity stood its ground and delivered solid returns.

As can be seen from the graph below, we can see that regional & global equity noted a strong divergence in development with solid double-digit gains during H1 2023. This is the reason we always emphasize investors should be long-term owners of profitable businesses, able to generate positive cash flow.

Selected Regional & Global equity indices performance (H1 2023)

Source: Bloomberg, InterCapital Research

Below, we present you with a more detailed overview of the regional equity market, presenting you with companies that contributed to its strong performance in the first half of 2023. First, we will take a look at the Croatian equity market and look at each CROBEX10 constituent to gain an overview of their performance during the first half of the year.

H1 2023 performance of CROBEX10 constituents

Source: Bloomberg, InterCapital Research

Moving on to the performance of CROBEX10 constituents, 9 out of 10 constituents noted a positive price development. And not just a positive one, but a strong double-digit increase for most of them. The best-performing stock by far was Span – taking the throne with as much as 69.2% growth in share price during the first half of the year. Besides price development, we emphasize that Span noted a strong increase in liquidity on ZSE, being the most traded stock in H1. We are glad that investors recognize quality companies on ZSE. Span is followed by Podravka and Končar, who also noted a strong double-digit increase of 36.7% and 31.5% in share price, respectively. The share price increases came on the back of solid Q1 results. During Q1, Podravka recorded a solid double-digit increase in the top line of 13% YoY, supported by growth in the Pharma segment (+41% YoY), spurred by the Eastern European market. Further, Podravka also managed to increase its margins on all profitability levels. Končar also reported a good quarter. Its normalized margins slightly suffered due to pressure from an increase in material costs, but the company managed to increase its backlog on the ATH level, which offers rock-solid reinsurance. Also, almost every other CROBEX10 constituent reported a double-digit increase with only Ericsson NT being in the red with a 7.6% share price decrease.

H1 2023 performance of SBITOP constituents

Source: Bloomberg, InterCapital Research

Looking at the Slovenian main index on LJSE, similar developments can be seen. Again, 8 out of 9 constituents were in the green. Krka, the company with c. 1/3 of SBITOP weight, increased by 26.1% during H1. To put in today’s economic perspective, we find Krka’s balance sheet to be advantageous in this period of higher interest rates while its business model is strongly positioned to achieve further market expansion in the future. Besides Krka, two other heavyweights in SBITOP also noted a double-digit growth, this being Petrol and NLB with 20.5% and 17.9% increase, respectively.

However, we would like to emphasize that looking at both regional stock exchanges, the mentioned developments came on the back of lower liquidity, which might indicate elevated investor caution.

H1 equity turnover on ZSE (H1 2013 – H1 2023)

Source: ZSE, InterCapital Research

H1 equity turnover on LJSE (H1 2013 – H1 2023)

Source: LJSE, InterCapital Research

Romanian GDP up 2.4% YoY in Q1 2023

According to provisional data published on Friday by the National Institute of Statistics, the Romanian GDP grew by 2.9% YoY in Q1 2023 and amounted to RON 318.5bn. Meanwhile, seasonally adjusted quarterly GDP in real terms increased by 2.4% YoY and 0.2% QoQ in Q1 2023.

Breaking the components of the GDP a bit further, on a YoY basis in Q1 2023 final consumption increased by 6.9% and amounted to RON 272.4bn. Inside this category, Households recorded growth of 7%, amounting to RON 237.6bn, while the General government increased by 6.4%, amounting to RON 23.7bn. Gross fixed capital formation increased by 10.4% YoY, amounting to RON 61bn, while net exports were recorded at RON -13.3bn. Exports increases 1.7% YoY, while imports increased at a slower rate of 0.2%.

Households still contribute the large majority of the Romanian GDP, comprising 74.6% of the total. General government accounts for 7.5%, in line with previous readings, while gross capital accounts for 19.1%. Net exports, while still negative, do show improving signs, with exports accelerating growth compared to imports.

Romania posting positive numbers even with the current uncertain macro outlook should pose an encouraging sign for foreign investors about the health of the economy. If the provisional data proves accurate, it would mean Romania has posted 8 straight quarters of positive GDP growth, with Q1 growth being the slowest, easing from a 4.5% expansion in the prior period, primarily due to government spending (6.4% vs 9.2% in Q4 of 2022) and fixed investment (10.4% vs 11.8%) slowing down.

Romania GDP growth (quarterly, vs. same quarter of the previous year, %)

Source: Romanian National Institute of Statistics, InterCapital Research

Upcoming Events – July 2023

Here you can find the dates for the upcoming events of the regional companies.

wdt_ID Date Ticker Announcement Country
8 18.7.2023 KRKG Krka ex-date Slovenia
9 20.7.2023 KRKG Krka Q2 2023 Results Slovenia
10 20.7.2023 ADPL AD Plastik General Shareholders Meeting Croatia
11 21.7.2023 PODR Podravka Q2 2023 Results Croatia
12 25.7.2023 ERNT Ericsson NT Q2 2023 Results Croatia
13 25.7.2023 ATGR Atlantic Grupa Q2 2023 Results Croatia
14 25.7.2023 TRP Teraplast Q2 2023 Results Romania
15 25.7.2023 ATPL Atlantska Plovidba Supervisory Board Meeting Croatia
16 26.7.2023 TRP Teraplast Q2 2023 Results Conference Call Romania
17 26.7.2023 ATPL Atlantska Plovidba Management Board Meeting Croatia
18 26.7.2023 ARNT Arena Hospitality Group Supervisory Board Meeting Croatia
19 27.7.2023 KOEI Končar Q2 2023 Results Croatia
20 27.7.2023 HT Hrvatski Telekom Q2 2023 Results, Conference Call for investors and analysts Croatia
21 27.7.2023 ARNT Arena Hospitality Group Q2 2023 Results Croatia
22 27.7.2023 ADPL AD Plastik Q2 2023 Results Croatia
23 28.7.2023 WINE Purcari Wineries ex-date Romania
24 28.7.2023 EQNX Equinox Q2 2023 Results Slovenia
25 28.7.2023 SNP OMV Petrom Q2 2023 Results, Conference Call Romania
26 28.7.2023 ATPL Atlantska Plovidba Q2 2023 Results Croatia
27 31.7.2023 RIVP Valamar Riviera Q2 2023 Results Croatia

Due to the nature of these events, they are subject to change (might be postponed or canceled).

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